In late 2009, investing in an REO investment property may make sense if you buy right. Here are some key factors to help you buy “right.”

1) Positive cash-flow?

2) Cash-on-cash return?

3) Pay-back period?

4) Exit strategy windows?

Let’s start with number 1) Positive cash-flow. The simple equation is income from rent minus expenses. If you can rent your investment property for $1,000 per month and your mortgage is $510 per month, then your cash-flow is $500 per month. You would still need to subtract insurance, property taxes, any utilities, and a vacancy reserve.

Let’s assume:

* Insurance = $70 per month
* Property taxes = $100 per month
* Utilities = $30 per month
* Vacancy at 2 months per year = 2 * $510 = $1,020 per year = $85 per month

Total expenses outside of mortgage = $285

Total expenses = $510 mortgage + $285 = $795.

Cash-flow = $1,000 – $795 = $205 per month.

So in this example, the investment property passes our cash-flow test. We would earn $205 per month in cash-flow.

Now let’s check number 2) Cash-on-cash return. For our example, we are looking at a $100,000 house with 20% down or $20,000.

The cash-on-cash (COC) is ($205*12)/$20,000 = 12% per year

COC doesn’t mean much when you take it in a vacuum. So we compare it to what you would get had you put your money in a “safe” investment like a T-bill. Today’s 10 year T-bill rate is 3.5% according to the US Treasury. Our 12% looks pretty good compared to 3.5%.

But investing in real estate is riskier than putting our money in a T-bill. So to take it one step further, we figure out our “risk-adjusted return” or RAR.

RAR = 12% – 3.5% = 9.5%

So does this pass our cash-on-cash test? This also depends. But if we have a rule for ourselves to expect a 2-times return on the additional risk that we take then yes, this passes our test…

2 times 3.5% = 7%.

Since our RAR of 9.5% is greater than 7%, we pass our criteria.

Let’s move on to number 3) Pay-back period. A real estate investment property is a long term play. You saw that we compared our RAR to a 10-year T-bill. Expect to hold the investment for many, many years.

However, we do want to know when we will get our initial investment of $20,000 back. Based on the projected net cash-flow of $205 per month, we would get back $2,460 per year. In a little over 8 years, we will get our $20,000 initial investment back. So our payback period is 8 years. Since this is less than the 10-year T-bill maturity, I would say that we’re okay with the pay-back period test.

Our last test, number 4) Exit strategy windows is also important. Even though we may have all the right intention to hold our investment for the long-term, 8 years in this example, something can come up that would require us to shed our investment earlier than planned. Is there a way to sell the investment property without incurring a loss? Is there a way to sell it for a profit?

Ideally, you would be able to answer yes to the two questions above. Luckily, since the property passed tests 1 to 3, it will almost always be easy to sell. Why is that? Let’s take a look…

• The historic rate of return that has investors excited has been 10%. Our investment yields a COC of 12%.
• We can safely expect our investment property to go up 2% per year due to inflation. This makes it a better value over time.
• If we reinvest our cash-flow in a T-bill, we would accelerate our pay-back period. This is slightly cheating, but earning income is earned income.

This property passed test number 4.

So if real estate is such an attractive investment, why did so many people get burned?

… They violated tests 1-4.

But for investors who do follow the rules, what can they do with the $205 per month cash-flow? …

How about using that money to lease a car like a Toyota Camry? For free? For as long as they want?

Isn’t that nice? Having the right REO investment property makes this possible.

The volatile housing market brings out scammers like cockroaches in an unclean kitchen. Being a real estate investor, I have seen many unclean kitchens. The good news about unclean kitchens is that the mess is obvious. Rental scams, on the other hand, appear neat but can make a mess of your rental property business if you fall for them. Here is what to look for so that you can screen out rental scams.

One of my favorite places to post for rent ads is Craigslist. It’s a great free website where landlords and renters can meetup and potentially do business. Because of its popularity, Craigslist is also a magnet for internet scammers.

Rental scammers use two elements in their effort to unguard an unsuspecting landlord. The first element that they use to try an instill trust is what I call the church technique. They pretend to be a pastor or a reverend or a missionary or someone that is associated with a church. In most people’s mind, church equals good – as in a good psychological technique. See the email that I received below for an example:

How to sell a timeshare is a question that is coming up quite often these days. One of the reasons is that many people are having financial difficulty during these bad economic times. In addition to that there are many people who bought timeshares thinking they would use it often, but then realize that they don’t have time for it anymore.

The timeshare market has really been hit hard during this economic downturn. Part of the problem was self-inflicted because just like the single family home real estate industry they overbuilt thinking that demand would continue going up and up. The timeshare market, unlike the single family home market is actually a pretty good model, though. Think about it. You build a cookie cutter; big complex … each unit costs relatively little to build as part of a whole … and the builder gets to sell it 100 times over … what a profit!

Now, the buyer has a problem on the flip side when trying to figure out how to sell a timeshare. Again, there are many reasons why a buyer would want to sell. But, the biggest problem is that they’re competing with the builders themselves. In a timeshare resale market, the builder has an advantage because they can discount pretty heavily. If you bought the timeshare at retail prices, say $40,000 for a two week stay, the builder can discount up to 50% and likely still make a profit. Why? Remember they can “sell” the same unit up to 100x or more!

So, how to sell a timeshare is a tough problem for a seller. The first key thing to do is to price your unit correctly. Look at several different resale websites to see how much others are reselling their units for. Keep in mind, even the unit owners are reselling their units. Many owner-sellers don’t want to take a hit in selling, so they keep the price at or around what they bought it for. This is not a good idea. People familiar with the timeshare resale market know where to go for discounted units.

Make sure you know all of the assets that your timeshare has to offer. For example one of the hot selling points for many timeshares is the ability to exchange your unit for “like” units in other parts of the world. How to sell a timeshare using your assets is best described like the following. You should know which exchange program you are in, if any. Check out what amenities you have in your complex. Do you have a pool, concierge or even a grocery store within the complex? And, is your unit deeded or not? Deeded is a big issue for those looking to pass it on to the next generation in perpetuity.

Now, if you’re looking to sell your timeshare quickly, you really should look at all options. There are companies will buy at a fixed price and they pay quickly. There are also companies who allow you to post your unit, but for a fee. Then it’s up to you to list, show, price, etc. But the headache of selling, paperwork, etc. is on you.

Oftentimes, the question of how to sell a timeshare is not as important as when to sell a timeshare. The best time to sell a timeshare is not when you are desperate nor when the market is flooded with timeshares. In either case, you’ll likely be selling a steep discount. Just keep some simple ideas in mind: research the timeshare resale market within your area, price your unit appropriately, perhaps even aggressively if you are in a hurry, look at all the amenities your unit / complex has to offer, and don’t be afraid to sell at a “loss” if you need to.

Investment property financing is a topic that many new investors do not know where to begin to learn. The first principle to consider in any type of financing though is to understand some basics. For example, what is the loan amount that you’re financing, how long of a term do you want or can get, what is the interest rate, and what are the fees to close the loan.

One other thing to consider in investment property financing is when I need to make the first payment. This is actually true for primary residence ownership as well as investment properties. However, with investment properties, you can almost stretch out a free month of income before paying your first mortgage payment.

Now to some more important issues related to investment financing. These days, it’s very difficult to get lenders to fund investment properties. They used to take all kinds of borrowers with “stated income”, some even with 5 percent down payment. Today, with the financial meltdown, these are impossible loans to get. So, you need to make sure that you have adequate credit, a sizable down payment, generally 30% is required, but there are some exceptions, and an income statement that makes sense to the lender.

What does an income statement mean in this example? It means the rent that you will be getting from the tenant minus the expenses. Expenses include: mortgage, interest, property taxes and insurance, as well as maintenance, association dues, any required fire sprinkler systems, etc.

Now investment property financing is less rigorous for single family homes than they are for apartment financing or office building financing. In a single family home, it’s almost like getting a regular owner occupied home financing, BUT the key difference is the loan rate is generally higher by about 1 percentage point.

In apartment and office building financing, the lenders really want to know the income stream from the property. So, they consider the income generated from the building minus the expenses to run the building. Lesser importance is put on the actual credit rating of the borrower. Although these days the lenders are scrutinizing those as well.

All investment property financing is contingent on an appraisal. With a single family home, the appraisals are similar to the owner occupied appraisals, with the added review of rental comparables. Rental comparables mean that they look at other homes in the area to see what they are renting for. In this way, the lenders can determine whether you will be in right ball park for income.

With apartment and office building appraisals, sometimes the lender will also want an environmental report. What this report tells the lender is if there are any waste hazards that they need to consider when making the loan. Waste hazards could cause liability issues for the owner and thus the lender, as well as bring the overall value of the property down.

In addition to the additional review for investment property financing, in some cases the loan term is different than a regular owner occupied home. With apartment or office building financing, the term could be as short as 5 years. What that means is that the borrower must end up refinancing again in 5 years. Not a great thing, but one that is a fact of the industry.

Financing investment property does not have to be difficult, it just different and requires a slightly different view of paperwork.

There are many new first time home buyers in the market today. Many of them have not been given any home buying steps that could save them time and money. In fact, many steps are bypassed by first time home buyers because they’re too excited to get their hands on their new home. The very first step, in fact, is THE most important – who is your realtor?

There are many horror stories about shady realtors out to make a quick buck. With so many foreclosures and short sales on the market, it’s almost like the heady days of old. A shady realtor sees a newbie buyer and quickly shuffles him / her through a few properties, urging them to make a deal quickly before the next buyer comes along. Just think about the power of information that they have and you generally don’t. So, your home buying steps should always first include finding a reputable realtor to work with.

Another step often overlooked by new home buyers is deciding where you want to live or own a home. Often homebuyers both experienced and not, are captivated by good looking homes. But, remember you can have the best home in a bad neighborhood. And, what do you still have? A bad neighborhood. Trust me, this one is a killer. Here’s the reason why. Unless the neighborhood is going through serious gentrification, the surrounding bad homes will keep the value of your home down … and likely for a long time. Remember what your mom or dad told you a long time ago … location, location, location.

Another of the home buying steps that many people miss is what’s happening in the community? For example, do you know the local politics, what types of permits are required to do renovations, how many rentals per homeowner ratio are allowed? Let’s take that first one. Local politics could mean that the people who make the decisions in your community resist homeowners adding too many bedrooms. How might that apply to you? You may want to add a 4th bedroom, but what if the local politics limits the bedrooms to three. What do you do?

Permits are other contentious issues for many communities. If you’re buying a foreclosure or short sale property, chances are the properties need some type of renovation. New home buyers and investors don’t necessarily bother to check local planning department requirements for permits. Some communities even require homeowners to get permits just to put in simple ceiling fans.

The issue of rentals to homeowners could be one that bites you. If you do not have this on your home buying steps and you plan to rent out the home that you buy, you should really look into your local city requirements. For example, you may be intending to rent out your new purchase. But, the city has imposed a limit of rentals to homeowners and you have exceeded that limit. Guess what? You’re stuck.

There is no one check list that fits all, but having a guide for home buying steps is a good first start. There are plenty of people who have owned properties without an issue, but there are also those who have lost their shirts. Don’t be one of them.

The St Joseph House Selling Kit has been around since the dawn of house selling. Saint Joseph is known as the patron saint of this industry. I don’t think that this is his official stature in the church, but practically every real estate agent and even home sellers have heard of this him.

One of the reasons St Joseph was chosen as the patron saint for anything related to real estate is because he was a carpenter. According to the stories he made sure that all around him were taken care of and were never wanting for housing.

The tradition of burying a St Joseph statue in the back yard started because during times of economic hardship, people turn to something more spiritual. So, turning to religion makes a lot of sense. And, burying a statue of St Joseph gives great comfort to many homeowners who need to sell, especially during these tough economic times.

There are many types of St Joseph House Selling Kits, including just the statue, some come with manuals, and others too with a few other options. But, probably the best is a simple statue with a little prayer to go along with it.

The best way to use the St Joseph House Selling Kit is to bury the statue upside down near the “For Sale” sign. If that is not possible, bury the statue in the back yard or even in a flower pot. Then say the prayer that was included in the kit.

There are many stories of the success of the St Joseph kit from all around the world. Many sellers don’t necessarily start out believing in the kit, but there have been stories reported in USA Today, local newspapers and many other community articles. One report even stated that the owners had three real estate agents, dropped their price at least three times and waited for over a year to sell. It was not until they buried a St Joseph statue did they finally find success.

There are also stories that St Joseph is supposed to help keep appliances from breaking down. I suppose if you maintain the thought of “anything real estate related”; it would sort of make sense. That certainly would be a great side benefit of honoring this patron saint in this way.

Regardless of whether you believe in a St Joseph House Selling Kit or not, at least one can feel that every idea is well worth the effort. And, for the cost of these items, it’s nowhere near what you end up paying out in other fees. Let’s put it this way, how can it hurt?

During tough economic times there are many reasons why homeowners want to sell a home fast. You may want to sell fast in order to keep from going into foreclosure and maintain your good credit rating. On the other hand, you may also believe that there are upcoming events which will make it difficult for you to stay in your home, for example losing your job, a long-term illness or being furloughed (which is an all too common occurrence right now).

First off, there are plenty of companies out there right now looking for deals. They have already done their homework; know the markets and the values of properties. They’ve also calculated how much they can pay in order to turn a profit. And, the beauty of these companies or individuals is that they pay cash. This means that you don’t have to wait for them to get bank approval. The best thing about these companies is that in order to get started they basically only need to know the property address.

Regardless of what the reasons, in order to sell a home fast, you should keep some basic things in mind. The first thing to consider is any issues with the title on your property. Clear title is probably one of the first things a new buyer or investor is concerned about. For example, if you owe back taxes or there are city or other types of liens on your property, this will surely give new buyers pause for concern. Clearing up liens makes it easier for the new buyer to not worry about paying them after he / she takes over the property.

The next big item to help sell a home fast is to really check out deferred maintenance. Have you taken care of your property? Is the roof in really bad shape or does a toilet need to be repaired? Many sellers who try to get out of a property fast are already in a bad position financially. So, they decide not to put any money into a property to fix it up. Any new buyer or investor will surely consider the cost of fixing a property before they make an offer. Some tricks would be to make simple, cosmetic repairs so at least the property “shows” well.

Who pays for what? There are many fees on a check off list, including title insurance, transfer fees, appraisal and more. Think about which ones you might be able to absorb before putting your house on the market. The reason is simple. The quicker you can make these decisions, the faster you’ll come to an agreement on the sale of your property.

Here’s a unique option to sell a home fast. If you are deep in financial difficulty (this holds true for both homeowners and investors), consider deeding it back to the bank. This is called a “deed in lieu.” It means that you want the bank to take it back (debts and all) in lieu of foreclosing on you. It may not be as fast as you’d want, but it hopefully keeps you from having to worry about finding a buyer.

Price is not always the only factor in trying to sell a home fast. It is just one factor. It is still true that location, location, location is important. However, there are plenty of examples of investors scooping up properties in bad locations, but have tenants in them already. And, if they are Section 8 tenants, it could be a marriage made in heaven. Section 8 is a government backed program that pays you, the landlord, come rain or shine, their portion of the rent.

No matter what your reason for wanting to sell a home fast, there are ways to make the sale go faster and plenty of buyers looking for the right deal. You need to make the decision to “fish or cut bait” as they say. This is often not an easy decision, but once you do, the rest becomes a whole lot easier.